The peak demand theory, while plausible, is a little too pat. That’s because the oil markets face a bigger known unknown (to borrow an expression used by former U.S. defence secretary Donald Rumsfeld) in the form of unburnable carbon. What is known is that burning carbon is raising carbon-dioxide levels to potentially catastrophic levels as the planet warms. In May, an atmospheric station in Hawaii recorded an atmospheric reading of 400 parts per million of CO2 equivalent, a 25-per-cent increase over 55 years and a rate of increase three times faster than it was in the early 1960s. Climate scientists say the CO2 must be stabilized at 450 ppm to limit global warming to two degrees above the temperature that prevailed before the Industrial Revolution.

What is not known is how much oil and coal will have to be left in the ground to prevent runaway carbon-dioxide buildup in the atmosphere. Earlier this year, the Grantham Research Institute on Climate Change at the London School of Economics and a not-for-profit research group called Carbon Tracker issued a paper titled “Unburnable carbon 2013: Wasted capital and stranded assets.” It concluded that about two-thirds of the Earth’s estimated oil, gas and coal reserves would have to stay in the ground if the two-degree goal is to have any chance of being achieved. The International Energy Agency agrees.

Some pension funds are already worried that the enormous stored wealth of the hydrocarbon players – their reserves – is a mirage. Last month, the managers of 70 pension funds with assets of more than $3-trillion wrote a letter to the top 45 oil, gas, coal and utility companies asking them to explain how climate change would affect their business. “As long-term investors, we see the world moving toward a low-carbon future in which fossil-fuel reserves that companies continue to develop may actually become a liability,” Jack Ehnes, head of California’s State Teachers’ Retirement System, said in a Washington Post article.

Put the peak demand and a yet another “peak” – peak carbon – together and you have a scenario that should send waves of anxiety through oil and coal companies and their investors. The share prices do not reflect either of the two risks, suggesting that investors rightly do not believe oil use will fall, or that they’re deluded. Energy was always a volatile investment, prone to cycle swings. The next swing could be down forever.

About $8 trillion of known coal reserves lie beneath the earth’s surface. The companies planning to mine and burn them are being targeted by a growing group of investors concerned with the greenhouse gases that will be made.

Storebrand ASA, which manages $US74 billion of assets from Norway, sold out of 24 coal and oil-sands companies since July including Peabody Energy, the largest US coal producer, citing a desire to cut fossil-fuel industry holdings. This month Norway’s opposition Labour Party proposed banning the country’s $US800 billion sovereign wealth fund from coal investments.

“Maybe we’ve hit some kind of nerve in the debate,” Christine Torklep Meisingset, Storebrand’s head of sustainable investments in Oslo, said by telephone. “Hopefully, other investors will be acting along the same lines. There could be an interesting parallel to tobacco.”

The movement is an offshoot of a campaign by more than 70 investors to pressure all fossil-fuel industries on climate change. It harks to the 1990s anti-tobacco push and is gaining help from unlikely partners. The International Energy Agency, a 28-nation group promoting energy security, is lobbying increasingly to limit the release of heat-trapping gases.